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Flipkart’s Myntra Now Owns Jabong For $70 Million

Flipkart’s Myntra Now Owns Jabong For $70 Million

With yet another acquisition, Flipkart has ensured it is continuing the e-commerce fight in the marketplace.

Recently, Flipkart Ltd has taken over Jabong via its unit Myntra in a cut-price deal that values the online fashion store at $70 million securing its position as India’s number 1 e-commerce marketplace in competition to Amazon India.flipkart-myntra-acquisition

According to a statement by Global Fashion Group (GFG) who owns Jabong, Flipkart beats other Jabong suitors such as Snapdeal will pay cash for the acquisition.

GFG plans to sell Jabong

For more over a year now, GFG has been looking for a buyer for Jabong. For this purpose, GFG held discussions with several firms including Aditya Birla Group, Future Group, and Snapdeal.

Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India. We have always believed in the fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith. Binny Bansal, co-founder, Flipkart

He adds

This acquisition is a continuation of the group’s journey to transform commerce in India. I am happy that we will now be able to offer to millions of customers a wide variety of styles, products and a broad assortment of global as well as Indian brands.

Dip in Jabong’s value

The sales by Jabong marks one of the most dramatic declines in the online retail business of India.

At the end of 2013, the value of Jabong was as much as $508 million (about €388 million). In the same financial year (ending March 2014), Jabong had reported a sale of Rs 438 crore. Although the sales witnessed by Jabong increased to Rs 869 crore in the last financial year, the value of Jabong collapsed due to a combination of a funding crunch, market share losses, and leadership issues.

Why Flipkart-Myntra acquired Jabong

The reason behind Flipkart’s Myntra acquiring Jabong is that it will boost sales at a time when Flipkart is facing difficulty in reviving its growth. Also, Flipkart struggles to protect its top position in a market where Amazon is making rapid growth.

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Fashion is the second largest category in India after electronics. It is valued at $16 billion annualised revenues. It contributes for about 30% of e-commerce transactions. Jabong has built a loyal customer base over years and consumers are associate Jabong with brands not available on other online stores.

Jabong offers over 1,500 international high-street brands, designer labels, Indian ethnic, sports labels and more than 150,000 styles from over 1k sellers. Some of the international brands and labels available on Jabong include Lacoste, Timberland, Swarovski, Forever 21, The North Face, Bugatti Shoes, G Star Raw, Tom Tailor, Topshop, and Dorothy Perkins.

“Jabong has built a strong brand that is synonymous with fashion, a loyal customer base and a unique selection with exclusive global brands”.

The acquisition of Jabong is a natural step in our journey to be India’s largest fashion platform. We see significant synergies between the two companies, especially on brand relationships and consumer experience. Ananth Narayanan, chief executive, Myntra.

Jabong matched larger competitor Myntra in sales until early 2014 but has dropped since then as Myntra’s Flipkart spent so much on discounts and advertising in order to lure customers.

By the end of May, Jabong reported a 14 percent increase in the revenue to €32.6 million for the March part. The recently taken over unit by Flipkart, adjusted Ebitda (amortization, depreciation, taxes, and earnings before interest) loss narrowed to €11.9 million from €16.3 million in the same quarter a year before.

Also, last year, the company had faced an exit of senior management executives, strong competition from Amazon India and Myntra, and a slowdown in funding.

In September 2014, German investor Rocket Internet teamed up Jabong with four other online fashion retailers in Australia, South-east Asia, the Middle East, Russia, and Latin America in order to create GFG.

Rocket Internet and AB Kinnevik jointly owns GFG. The German e-commerce company’s fashion businesses emerged from countries including Zalora in South-East Asia and Australia, Namshi in the Middle East, Lamoda in Russia, and Dafiti of Latin America.

In the start of July, Jabong expedited its sales process as Rocket Internet and Kinnevik were resistant to invest more capital into the company in a low e-commerce market.

The valuation of GFG, which was €3.1 billion in July 2015, lowered down to $1.13 billion (€1 billion) after a period of 10 months. In May, GFG said it raised $339 million (€300 million) from Kinnevik and Rocket Internet at a valuation that was a third below the previous round.

Do you think Myntra will overpower Amazon India?

Sakshi is a content marketer during the day and a reader by night. She writes content sprinkled with a twisted imagination. She has done her graduation in psychology from Delhi University and has an insane love for history.

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